Today the Dow Jones Industrial Average (DIA) 20-day EMA crossed down through the 50-day EMA above the 200-EMA (Dark Cross), generating an IT Trend Model NEUTRAL Signal. If today's price bounce continues next week, the crossover could be reversed.
Our weekly charts go final on Fridays and this week saw a weekly Price Momentum Oscillator (PMO) Crossover SELL Signal on the Dow Industrials ($INDU). While the rally to finish the week was impressive, it could not prevent a negative close. Overhead resistance is holding at about 34,500. Support is currently being tested. The weekly RSI has moved into negative territory below net neutral (50). The weekly chart suggests more downside.
The DecisionPoint Alert Weekly Wrap presents an end-of-week assessment of the trend and condition of the Stock Market, the U.S. Dollar, Gold, Crude Oil, and Bonds. The DecisionPoint Alert daily report (Monday through Thursday) is abbreviated and gives updates on the Weekly Wrap assessments.
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MAJOR MARKET INDEXES
For Today:
For the Week:
SECTORS
Each S&P 500 Index component stock is assigned to one of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
For Today:
For the Week:
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 3/30/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The rally was strong, but the prior high mostly held up as overhead resistance. The higher high does set up some negative divergences. The picture on the daily chart below is bullish given the positive, rising RSI and PMO BUY Signal.
The VIX was above its moving average on our inverted scale, but closed below to finish the day. Stochastics have tipped upward. Internal strength is visible.
SPY Weekly Chart: We see a bearish rising wedge, but the rising PMO does put a bullish spin on the chart.
SPY Monthly Chart: While there are two final trading days for May next week, we will cover the monthly charts in this issue of the DPA. The SPY monthly PMO is still falling, but we'll need to keep an eye on it next week.
New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential is rising again, but a negative divergence between New Highs and price tops is in the making.
Climax Analysis: There were two climax reading on the four eligible indicators, and SPX Total Volume was above the one-year daily average, so we think we can declare today as having an upside initiation climax.
*A climax is a one-day event when market action generates very high readings in, primarily, breadth and volume indicators. We also include the VIX, watching for it to penetrate outside the Bollinger Band envelope. The vertical dotted lines mark climax days -- red for downside climaxes, and green for upside. Climaxes are at their core exhaustion events; however, at price pivots they may be initiating a change of trend.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERSOLD.
The STOs are both still in decline. The harsh decline earlier in the week seems to have stunted their growth. Participation is showing some improvement but both %Stocks > 20-day EMA and %PMOs Rising are below the 50% bullish threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM is in line with declining short-term indicators as it declines as well. The ITVM on the other hand is now rising again. Today's high volume rally could be the culprit.
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PARTICIPATION and BIAS Assessment: The following table objectively shows the depth and trend of participation in two time frames.
- Intermediate-Term - the Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA). The opposite of the Silver Cross is a "Dark Cross" -- those stocks are, at the very least, in a correction.
- Long-Term - the Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA). The opposite of a Golden Cross is the "Death Cross" -- those stocks are in a bear market.
The following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Sectors, and the eleven S&P 500 Sectors.
We have begun collecting SCI and GCI data for four new sectors: Biotechnology (IBB), Regional Banking (KRE), Retail (XRT), and Semiconductor (SMH).
Biotechs currently hold the highest IT Bias at +17. No real improvements were seen under the hood so we aren't reading too much into this. Energy holds the most negative bias at -30. It did see some deterioration on the GCI. The big problem is that the SCI is reading so much lower than the GCI.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
With the highest Silver Cross Index reading being 61, we know that this rally is far from broad. Gold Miners are on the decline in a big way and the deterioration of both the SCI and GCI show this. Lowest on the list are Regional Banks (KRE), but it actually saw a one percentage point increase on the SCI. We think the group is still very weak.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Semiconductors (SMH) hold the top GCI reading and no wonder given that the rally has been mostly led by mega-cap Technology stocks. We saw some increase in long-term participation, but the SCI lost ground suggesting that this group is not on the way up, but likely on the way down. The lowest not surprisingly belongs to KRE.
The following chart objectively shows the depth and trend of participation in three time frames.
The market bias is BEARISH in all three timeframes.
Participation readings are all below our 50% bullish threshold, the SCI continues lower, as does the GCI.
CONCLUSION: Today's rally was more broad, but at the same time mostly due to aggressive growth sectors, Technology, Consumer Discretionary and Consumer Staples. That speaks well for the market. We still see big problems in participation including declining Silver Cross/Golden Cross Indexes. There is a chance that this could resolve next week. At the time of writing, a tentative debt ceiling deal has been agreed to between the White House and House. This could really get things heated up to the upside. Watch your short positions. It may be time to pause those positions that count on a correction.
Erin is 14% long, 7% short.
Calendar: Monday the U.S. markets will be closed for Memorial Day.
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BITCOIN
Bitcoin has been in a holding pattern for some time. It hasn't resolved the large bearish rounded top yet. Indicators are negative given the RSI below net neutral (50), declining PMO and Stochastics. Still, the PMO is mostly flat so we would expect more sideways movement that will likely lead to some downside.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Yields are on the rise with a few of them reaching multi-year highs. Resistance is arriving for some of these yields, but given the breakout in short-term yields, we would expect breakouts ahead.
The Yield Curve Chart from StockCharts.com shows us the inversions taking place. The red line should move higher from left to right. Inversions are occurring where it moves downward.
10-YEAR T-BOND YIELD
We are going to know a lot more about the 10-year yield next week. There is a large bullish falling wedge that suggests a breakout ahead. Looking at yields above, we think it is highly likely we will get that breakout. Indicators are very positive as well.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power has been shrinking, home prices have come under pressure.
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This week the 30-Year Fixed Rate changed from 6.39 to 6.57.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We saw a large bullish engulfing candlestick on TLT Friday, but indicators, while trying to improve, are still negative. It will be interesting to see if a debt ceiling deal pushes Bonds higher as default seems less likely. For now, we expect another day of upside.
TLT Weekly Chart: Overhead resistance held and now the bottom of the current trading range is coming up quickly at about 97.00. The weekly PMO has ominously topped so we would expect a breakdown there.
TLT Monthly Chart: The monthly PMO looks terrible as it has topped beneath its signal line. This month's low broke longer-term support. While Bonds may see some upside this week, the long-term backdrop is very negative.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The Dollar is now up against overhead resistance. Friday it paused, likely in preparation for a breakout. The indicators are about as positive as you can get. We saw a Golden Cross LT Trend Model BUY signal this week as well. We expect the Dollar to continue to push ever higher.
UUP Weekly Chart: There is a large bullish double-bottom on the weekly chart. We also see that price is holding the rising trend. We expect we will see a weekly PMO BUY Signal next week. The minimum upside target of the double-bottom would take price close to the 2022 highs.
UUP Monthly Chart: The monthly chart has a bullish spin as well given the positive monthly RSI and particularly, the new monthly PMO bottom above the signal line.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GOLD Daily Chart: Gold is likely in trouble. The Dollar is ready to breakout and the market has a high likelihood of a good week based on debt ceiling deal. This doesn't even take into account the rounded top on the daily chart, nor the negative indicators that accompany it.
Sentiment could definitely get more bearish. The bearish rising wedge is about to execute. The PMO has hit negative territory. We would look for Gold to decline in the short term.
GOLD Weekly Chart: The weekly chart is very negative and also suggests a breakdown ahead. While the weekly RSI is in positive territory, it is falling fast. Worse is the weekly PMO top in overbought territory.
GOLD Monthly Chart: We see a trading range on the monthly chart and unfortunately it appears time for the bottom of the range to be tested. The monthly PMO is on a new Crossover BUY Signal, but the price pattern implies decline ahead.
GOLD MINERS Golden and Silver Cross Indexes: Today the GLD 20-day EMA crossed down through the 50day EMA above the 200EMA, (Dark Cross), generating an IT Trend Model NEUTRAL Signal. This only adds insult to injury as participation is nowhere to be found. The RSI did just hit oversold territory, but other than that we don't see much here.
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil has been all over the place, but ultimately it remains in a rising trend. Indicators are mostly neutral, but the top on Stochastics does bother us in spite of a PMO BUY Signal. For now we will lean into the PMO BUY Signal and look for more upside.
USO/$WTIC Weekly Chart: Crude Oil is in a holding pattern having found a trading range between 60 and 80. The weekly PMO is flat and unhelpful and the weekly RSI is negative but rising. We believe the sideways trading range will continue.
WTIC Monthly Chart: The monthly chart tells us to beware. Support may be holding but in the long term, the monthly PMO is headed lower quickly and the monthly RSI just moved into negative territory. If this trading range doesn't hold up, it will likely be due to a breakdown, not a breakout.
Good Luck & Good Trading!
Erin Swenlin And Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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NOTE: The signal status reported herein is based upon mechanical trading model signals, specifically, the DecisionPoint Trend Model. They define the implied bias of the price index based upon moving average relationships, but they do not necessarily call for a specific action. They are information flags that should prompt chart review. Further, they do not call for continuous buying or selling during the life of the signal. For example, a BUY signal will probably (but not necessarily) return the best results if action is taken soon after the signal is generated. Additional opportunities for buying may be found as price zigzags higher, but the trader must look for optimum entry points. Conversely, exit points to preserve gains (or minimize losses) may be evident before the model mechanically closes the signal.
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